Bill Gates "Kinder Capitalism" Requires New Asset Classes = Securitizing Happiness.

There's a WSJ article this morning about Bill Gates' new ideas for a more creative "kinder capitalism" that needs to work better to address the issues of the world's poor.  That #, depending on how you count it, is somewhere between one-third to two-thirds of the world's 6 billion people.  Altho he says the ideas are still a bit fuzzy, he's planning to talk about it further in his speech at the World Economic Forum in Davos.

Here's a brief video clip on his concepts:

I applaud this kind of thinking, and Bill's efforts through the Gates Foundation are groundbreaking & innovative.  Other similar-minded groups at Omidyar Network, The Skoll Foundation, & Google.org also do amazing work.  I'm a supporter of microfinance accelerator Unitus also doing terrific stuff on economic innovation & emphasizing market forces to make the world better.

Securitizing Happine$$

However, I think there are still a few critical missing market components in what Bill is calling "creative" or "kinder" capitalism.  In fact, i'd say there are several hundred-trillion dollar asset classes that don't currently exist that, once created, will dramatically stimulate market forces to address global poverty issues & other beneficial public infrastructure. I call this effort Securitizing Happiness, or in the long form "Solving Global Economic Issues by Making Markets for Individuals, Small Business, & Natural Resources".  I think this is along the lines of what Bill's talking about, & i've written about it a few times.   

Note that i'm not professing some wacky socialist proposal for redistributing wealth -- i'm talking about unleashing the power of the market via the creation of huge new untapped economic asset classes, similar to the creation of mortgage markets and financial derivatives markets.

In particular, i think these missing asset classes include:

• small business equity markets (~50% of US GDP, more globally)
• individual economic futures (incl. aggregates & derivatives)
• human health impact of natural resources (water, air, land, etc)
  

For my more wacky & lengthy thoughts on this topic, please read this post from a few years back.  I'm continuing to refine my thoughts on the subject, and the concepts i'm working on with Startup Metrics are related in a somewhat convoluted but very essential way. 

hope to do more work on this down the road, and i welcome feedback.

UPDATE: put together a rough slide deck on this here:

Securitizing Happiness: Solving the World's Problems by Making Trillion-Dollar Markets for Individuals, Small Business, & Natural Resources

view presentation (tags: finance capital.markets social.entrepreneurship economics)

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btw, also mentioned in the Gates article is Dr. Muhammad Yunus, founder of the Grameen Bank, one of the fathers of modern microfinance, & recent winner of the Nobel Peace Prize... and certainly one of the most amazing social entrepreneurs i've ever met.  He was in town recently speaking about his new book, Creating a World Without Poverty. 

Two other books mentioned in the article are among my favorites:

• The Mystery of Capital, Hernando de Soto
• Fortune at the Bottom of the Pyramid, CK Pralahad

The Mystery of Capital in particular is a book that really opened my eyes to the value of property rights and housing / mortgage markets in making economic progress.  It's worth the read.

Comments

[Dan Goodman]

Dave - love your blog, even more that you include stuff like this. Creating new asset classes is an interesting idea. I'd love to see it. But how do you envision there being a financial return on investment in the classes you mention (and describe in your previous post)? Capitalism works because individuals can invest in assets and receive a financial return. You're talking about creating incentives for individuals and corporations to invest in worthy things like human health and a clean environment, but I don't see how a financial return can be had on that. Good things to do, no doubt, but not for financial reasons (unless there's a goodwill boost, like what is presumably motivating Wal-Mart). In order for there to be a financial return to an investor in an environmental cleanup project, for example, someone else would have to be willing to PAY for the clean environment. My suspicion is that Gates is going to talk about governments establishing financial incentives for investment in these things, in the form of things like tax credits. That way an individual (or a corporation) can get a financial return on an investment, but it's not the same thing as securitizing something abstract like human health.